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Boston-based Skyhook Wireless, founded in 2003, received a massive boost at Macworld back in January of 2008 when Apple CEO Steve Jobs announced that Skyhook was providing location services for the iPhone. Skyhooks solution, which is now on more than 50 million devices worldwide, determines a devices position using a combination of Wi-Fi access points, cell towers, and GPS signals.

We spoke with Ted Morgan, Skyhooks CEO and co-founder, to discuss Skyhooks history and the current state of location-based apps and advertising.

Mike Shean (my co-founder) and I were at an enterprise software company, selling software to Fortune 500 companies, and as we were traveling around the country, we were always looking for ways to check our e-mail we used to pull up next to buildings or office parks or apartment complexes and latch onto someones open access point and we just were stunned by the sheer amount of Wi-Fi signals around: it was very easy to always find a connection. So we started thinking through what kinds of business ideas could come out of this whole new world where there were Wi-Fi signals all over the place. One of the first things we tried to do was to see if we could patch these signals together and actually create a wireless network looking back, it wasnt the greatest idea, but we were digging around on it, and in the process of doing that we started mapping out all these signals using GPS devices and as we were doing this, we realized if you can map where a signal is, you could probably use that signal to figure out where you areso we kind of stumbled our way into this.

On how GPS and Wi-Fi complement each other:

GPS works very, very well when youre outside with a clear view of the sky. It gives you a very accurate fixthats what they designed it to do, to target missiles to land on cars and buildings. It just doesnt work well as you get around any sort of obstructions or indoors, and unfortunately thats where people spend most of their time. Wi-Fi, conversely, because those signals are indoorstheyre coming from indoorsworks very well in indoor and urban environments, but Wi-Fi doesnt work very well as you get outside of any populated area. So when you put them together, the two maps overlay themselves perfectlyand when you use them together, you also get some benefits where the two can help each other out both together are better than either one on their own.

In terms of speed, Wi-Fi is always going to be faster. The way GPS was set up, its a slow, plodding way of figuring out where your location is. They never conceived of the idea that someone would want a location in a second and nothing else. And in fact, thats most of the use cases on a device like the iPhoneI just want to figure out where the nearest restaurant is around me, find the Starbucks, share my location GPS benefit is it can get better accuracy: it can get down to about 10 meters. Wi-Fi gets down to about 20 meters, so it cant be as accurate as GPS, but it works faster, and it works in more of these difficult places.

On the impact of Steve Jobs endorsement of Skyhook:

I dont think you can trade that for any other kind of marketing benefit or financial benefit We had done a lot with other manufacturers and app developerswe had integrated with AOLs Instant Messenger app, we had done deals with iRiver but I think everyone would agree the introduction of the iPhone on its own was a watershed moment for all these consumer electronics devices and mobile servicesand so we really just latched onto an exploding curve right as it was taking off, and you just cant beat that.

At a location conference before the iPhone, I would know all 20 people there, because that was the entire industry. Now, theres 4,000 apps on the App Store that use location, with ideas no one ever could have conceived of, like finding the latest UFO sightings around you, or theres a new one that came out to monitor child predators in your areathings you would never think to roll an app around or a business around are being launched all over the world now that this has been completely opened up.

On the growth of location-enabled apps:

Weve played an evangelist role of explaining to people how location can add value to their apps. A music app like a Pandora or a Shazam you wouldnt think has any location element to itin fact, in Shazam, what you can do today is tag a song you like and itll mark the location where you were listening to it, and then you can actually see the top five songs people are listening to around you, as a way to get song ideas or get a sense for the area around you were pushing all the folks in these digital categories to think about location as a way to build community and increase the social element of these mobile apps.

We think we can help a whole bunch of other app developers introduce that social networking concept around location into their app without having to write a lot of code themselves. So youll see us add new capabilities that make it easy for an app developer to connect into Facebook and Twitter, find friends around them, and look for items they like that other people around them are familiar with, as well.

On the future of location-based advertising:

Advertisers are very, very interested in how they can use location to target people by proximityonly show the ad if theyre within walking distance of my restaurant or store, that stuff makes sense to thembut they also want to get a better understanding of where people are who see the ad and act on it, what types of people are doing this, based on where they live or where they work, where do they go during the day, how do they travel all that stuff is available, and the advertisers really want to take advantage of it.

Now what we have to do is get the entire ad world to reconfigure itself to handle location, because its never done that before. Ad networks dont know anything about location, campaign management tools dont know how to set up campaigns based on where you are in a certain part of town versus another, theres no inventory to mark why the ad for Dunkin Donuts should be different on one street versus anotherso all that stuff has to come along, but theres definitely a lot of interest, and the early tests in this area show great returns so thats an area were trying to figure out how we can get ourselves involved in, too. [More on Skyhook here.]

Jeff Goldman is a veteran technology journalist based in Southern California. For more installments in the Industry Insiders series, click here.

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